Foreign Direct Investment and Property Protection in Brazil

Lorena Lima Brown Frandsen

Student thesis: Master thesis

Abstract

Transfers and spillover of technology between countries are important means of improving the economic performance of a country, and thereby its competitiveness in global markets. Foreign direct investment (FDI) where the home country has a more developed technological base than the host country serves as a channel for such transfers and spillovers, and can spur economic growth. This paper statistically tests whether the level of intellectual as well as private property protection in Brazil has an effect on the amount of FDI that flows into the country, and whether this effect is greater in investments targeting high-technology industries than low-technology industries. These hypotheses are based on previous empirical studies that suggest a positive correlation between level of property protection and FDI inflows. This study finds that private property protection is a better determinant of FDI inflows in Brazil than intellectual property protection. Nevertheless, the relationship between private property protection and FDI is stronger in low-technology industries that in high-technology industries. Concerning intellectual property protection, it appears more strongly correlated with inflows of FDI in high-technology industries than low-technology industries. The findings imply that better enforcement of IPR legislation in Brazil could foster the technological development of the country via transfers and spillover of technology from FDI. Recommendations for Brazil to attract more high-technology FDI are to improve the domestic IPR system by reducing the processing time for the granting of patents and ensuring more timely and predictable court rulings on IPR cases. For foreign investors, this paper draws attention to the importance of studying the local business environment at the industry level when taking decision about whether to establish their business in a new country. This paper also provides reaffirmation to the body of literature that claims that property protection has an impact on inward FDI, and that the strength of such impact is largely dependent on the local context.

EducationsMSc in International Business and Politics, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2015
Number of pages93